The challenge to the EU:

stop the sugar dumping!

14th November 2002
The recent challenges mounted by Brazil and Australia at the WTO over
the EUs implicit and explicit sugar export subsidies have raised
fundamental questions about reforms to the Common Agricultural Policy.

Instead of responding with a coherent strategy that ends its sugar export
dumping, the EU has so far sought to deflect attention from the excesses of
its regime by raising concerns about the future of preferential access for
the ACP countries. Last month Pascal Lamy was reported as saying that
the challenge was very bad news for the ACP countries.1 Yet both Brazil
and Australia have publicly confirmed that they have no intention of
challenging the ACP countries preferential access to the European market.

The current low and unstable prices of the world sugar market are of
serious concern to the many and diverse developing countries that produce
sugar. The world sugar market is chronically over-supplied and Brazil, as a
major low-cost producer and exporter, has a critical role and responsibility
in shaping the future of the market. However the EU, as a high-cost,
heavily subsidised exporter, should now lead the way in showing
responsibility by ending its dumping.

EU imports of preferential sugar are highly valued by ACP countries

worth over euros 500m each year - but make up just a fraction of Europes
sugar supply, accounting for just 8% of Europes sugar supply. And since
the early 1980s, the EU has significantly increased quotas for domestic
sugar production far in excess of domestic needs, creating the continual
pressure to export. If EU sugar quotas were cut to their 1980 level, the
internal market would now be roughly in balance, with domestic
production and ACP imports meeting domestic consumption needs.

1 th
Agence Europe Daily Bulletin no. 8313, 7 October 2002

The challenge to the EU: stop the sugar dumping! 1

Instead, the EU is now the worlds largest exporter of white sugar. In 2000-
01, it exported almost 7 million tonnes of sugar, at prices far below its costs
of production. Where did all these exports come from?

3.8 million tonnes of non-quota sugar (so-called C sugar). Over half of

Europes sugar exports last year were produced in excess of EU quotas
- a blatant indication of the over-production that is built into the
current incentives of the EU sugar regime. The EU claims that C sugar
exports are not subsidised because they do not receive export
subsidies but C sugar is cross-subsidised by the guaranteed prices
granted for quota production. Excessive amounts of C sugar are
produced every year because farmers risk losing their contracts with
sugar processors if they deliver sugar beet short of their contracted
amount hence the in-built incentive to over-produce. Some EU sugar
beet farmers are calling for more flexible contracts with the powerful
sugar processors so that they can significantly reduce C sugar
production.2

1.5 million tonnes of quota sugar, for which export refunds are given
in order to bridge the gap between the internal price and the world
market price. The export refunds are raised through a levy paid by
farmers and processors made possible by the guaranteed high prices
they receive. But the cost of this levy is ultimately paid for by EU
consumers at euros 800m each year.

1.6 million tonnes of quota sugar re-exported as an amount

equivalent to ACP imports in order to keep the domestic market
sweet for the EUs biggest sugar beet farmers. Export refunds of
euros 800m are paid each year by EU taxpayers to make this possible.

Taken together, these 7 million tonnes of subsidised EU sugar exports help

depress the world market price and block low-cost sugar producing
countries out of valuable third markets such as the Middle East and North
and West Africa.

Last year the EU launched the Everything But Arms (EBA) Initiative under
which sugar-producing Least Developed Countries (LDCs) have been
given very restricted quotas for preferential access into Europe. But in
order to make room for this EBA sugar, instead of cutting back on

2
The Dutch Arable Farmers Union have proposed a bonus-malus system that
allows farmers to over-or under-deliver a margin of sugar beet to the processor
without penalty.

2 The challenge to the EU: stop the sugar dumping!

European quota production, the EU has cut back quota imports from the
ACP countries - literally trading one group of developing countries off
against another.

If Europe is sincere in its frequently stated claim that ACP preferential

access is an important form of development aid then, then it should be
publicly reaffirming its commitment to supporting their economies. Under
a quota system for sugar production in Europe, ACP and LDC country
interests should be given high priority, given that, for many, sugar is a
critically important part of their economies.

Following from our briefing paper, The Great EU Sugar Scam, Oxfam
calls on the EU to take the lead now by reforming its excessive domestic
production with:

A 25% cut in EU quota production, which would then make possible:

An end to EU sugar dumping. This would mean an end to all quota

exports and an end to all non-quota (C sugar) exports by storing all
C sugar for use in the following years quota

Restoring quotas for ACP preferential sugar imports (that have been
cut to make room for EBA imports) and standing by the EUs
commitment to support the economies of these countries

Greatly increased quota access for imports from the least developed
countries under the Everything But Arms Initiative

Published by Oxfam International November 2002

Published by Oxfam GB for Oxfam International under ISBN 978-1-84814-654-9

The challenge to the EU: stop the sugar dumping! 3